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18 Nov 2016

The watchdog Government Accountability Office recently issued a report on how major U.S. West Coast ports have responded to recent changes in global shipping, how selected shippers have been impacted by and responded to recent port disruption, and how efforts by the U.S. Department of Transportation are supporting port cargo movement and whether they can be improved. GAO conducted case studies of the three major port regions on the West Coast (Los Angeles/Long Beach, Oakland and Tacoma/Seattle), interviewed key stakeholders for each region as well as 21 industry representatives, and evaluated the DOT’s freight efforts relative to criteria on using quality information to support decision-making.

According to the report, in developing a freight data strategy the DOT should identify what supply chain information is needed, potential sources of that information, data gaps, and how the agency intends to use this information to inform freight efforts. GAO believes that by broadening its freight data strategy to include supply chain information the DOT would be able to think more strategically about the specific supply chain information it needs to support on-going freight efforts and advance national freight policy goals.

The report observes that some port infrastructure is outdated and not well suited to address the recent changes in global shipping. Available information suggests that existing capacity at each of the reviewed ports could not adequately accommodate larger ships and increased volumes. For example, acreage for storing containers within some terminals was identified as inadequate for handling increased container volumes, although a port may have sufficient acreage across its multiple terminals. Other infrastructure may be coming to the end of its useful life and needs to be replaced or retrofitted to more capably handle larger ships and increased volumes. Outside ports, aging roadways can also impede cargo movement to and from the port, particularly where freight rail, lorries and other road users converge at congested crossings and intersections.

According to GAO, infrastructure projects have been completed or are planned at all major West Coast ports in response to global shipping changes but some projects have been deferred indefinitely. Port authorities and other stakeholders indicate that infrastructure projects are of vital importance to be able to serve current cargo volumes and enhance the long-term competitiveness of their ports and shippers’ products. The report notes that infrastructure is funded through a combination of public investments and private sector partnerships, typically requiring significant resources and potentially decades to plan and complete. State and local governments, as well as port authorities of the three major West Coast port complexes, look to both the federal government and the private sector to secure funding for infrastructure projects.

The report also identifies various global shipping changes that have strained operations as well as efforts by West Coast ports to mitigate these difficulties. According to GAO, in recent years it has become increasingly difficult and time-consuming for lorry operators to obtain and pass road safety inspections, complete repairs and reposition chassis. Broader shipping alliances have complicated vessel unloading and loading, as cargo booked with multiple ocean carriers may be on-board the same vessel but bound for different terminals within a port or different destination ports. The standard daytime gate hours of marine terminals (7 or 8 am to 4 or 5 pm) may also be inadequate, particularly given the complexity and time required to load and unload containers, and marine terminal operators do not generally hire labour for extra shifts unless there is a specific demand by cargo owners.

According to the report, the difficulty in aligning competing public and private priorities or interests to fund or construct port infrastructure projects represents a key challenge to mitigating infrastructure and operation constraints stemming from global shipping changes. In addition, the lack of data on port performance and supply chains can undermine efforts to design and prioritise street improvements and various port-related projects. Limited information on supply chain practices can also lead to public investments underperforming.

The report describes how ports that are already strained and experiencing congestion may be particularly vulnerable to events such as natural disasters or disruptions that can further impede the movement of cargo through ports and, in turn, impact the supply chains of shippers. Most industry groups mentioned the 2014 and 2015 West Coast labour negotiation as the most disruptive event in the last five years. Over half of those groups said shippers took actions in response to that event, such as modifying their supply chains, but about one-third of the surveyed groups said some shippers had difficulty making such modifications due to specific firm or commodity attributes or prohibitively high costs. Other industry groups said shippers made no supply chain modifications because they were able to weather the disruption.

While the DOT’s freight-related activities have grown increasingly multi-modal and inclusive of ports since 2012 and the agency is seemingly making progress toward developing a more complete multi-modal network that accurately identifies freight facilities, there are still substantive gaps in the supply chain information the DOT and state and local governments have available to support freight efforts. GAO indicates in its report that better information and analytical tools to assess supply chains may improve the DOT’s freight efforts and recommends the development of a specific plan to identify:

data gaps that could help both the agency and states and local governments in the development of their freight plans and an approach for addressing obstacles to developing high-quality, reliable supply chain information;

current and planned efforts that can provide insights into supply chains and their impacts on freight networks; and

how the DOT plans to use the supply chain information and analytical tools to inform freight planning and programming.

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